IMF economist warns dollar stablecoins can fuel bank-style runs on fragile currencies

A new IMF working paper by economist Brandon Joel Tan warns that dollar-pegged stablecoins, while helping people in currency-controlled economies access U.S. dollars, could also accelerate coordinated flight from local currencies during a crisis.

The research argues that digital dollar-pegged assets are increasingly serving as an alternative gateway to foreign currency where official banking channels fail to meet demand. However, the same technology that improves financial access may also encourage coordinated shifts away from local currencies during crises, potentially worsening exchange-rate pressures.

The findings come from economist Brandon Joel Tan’s IMF working paper, Stablecoins and Fragility in Fixed Exchange Rate Regimes, which examines how stablecoins reshape parallel foreign exchange (FX) markets in countries operating fixed or heavily managed exchange-rate systems.

IMF says stablecoins create new opportunities—and new vulnerabilities

The paper concludes that Dollar stablecoins can offer practical benefits for consumers and businesses when governments tightly control access to foreign currency. In many emerging economies, official channels ration U.S. dollars, leaving citizens with few legal options to protect their savings or pay for imports.

Tan’s research models how stablecoins function within these constrained environments, showing that they effectively create “dollar-like claims” that are available around the clock through blockchain networks rather than traditional banks.

According to the paper, the digital assets also generate a highly visible market price that reflects demand for U.S. dollars in real time. That transparency can become significant when official exchange rates no longer reflect actual market conditions.

Tan wrote that stablecoins make “dollar-like claims easier to access” while simultaneously creating a high-frequency indicator of dollar demand. When the gap between official and market exchange rates widens, that pricing signal may encourage households and businesses to rapidly convert local currency into digital dollars.

The IMF paper suggests regulators may need temporary safeguards during periods of acute financial stress, including restrictions on unusually large or panic-driven transactions, to reduce the risk of sudden capital flight.

Although the report does not recommend banning stablecoins, it highlights the delicate balance policymakers must strike between encouraging innovation and protecting financial stability.

Dollar stablecoins are already reshaping parallel FX markets

The IMF’s analysis reflects developments already unfolding across several economies facing currency restrictions.

In Bolivia, airport retailers were reported in June 2025 to be displaying prices using Dollar stablecoins, specifically Tether’s USDT, as a reference while continuing to accept both U.S. dollars and the local boliviano. The practice illustrated how stablecoins are increasingly acting as unofficial benchmarks for foreign exchange pricing.

Argentina provides another prominent example.

During periods of strict currency controls and rapid peso depreciation, many Argentines turned to informal cryptocurrency exchanges—often referred to as “crypto caves”—to swap pesos for dollar-backed stablecoins at exchange rates closer to the unofficial market. The approach allowed individuals to preserve purchasing power despite limited access to U.S. dollars through traditional financial institutions.

These real-world examples support the IMF paper’s central argument that stablecoins are becoming an increasingly important component of parallel foreign exchange markets.

Rather than relying solely on banks or licensed exchange houses, users can obtain blockchain-based dollar exposure almost instantly through digital wallets and cryptocurrency exchanges.

As adoption grows, Dollar stablecoins are evolving beyond crypto trading tools into instruments that influence broader monetary dynamics in economies experiencing exchange-rate distortions.

Financial regulators warn of monetary policy challenges

The IMF’s conclusions align with growing concerns expressed by international financial regulators.

In March, the Financial Stability Board (FSB) warned that widespread adoption of dollar-backed stablecoins could increase currency substitution in emerging markets, weakening domestic monetary policy and making it easier to bypass capital-flow management measures.

The FSB said regulators should closely monitor how stablecoin markets evolve as they become increasingly interconnected with the broader financial system. The organization also highlighted potential liquidity, operational and financial stability risks as adoption accelerates.

“The use of stablecoins may have implications for monetary sovereignty and financial stability,” the FSB noted in its assessment, urging policymakers to develop appropriate supervisory frameworks before systemic risks emerge.

The IMF has previously echoed similar concerns in broader research on digital finance.

Earlier reports from the institution have acknowledged that tokenization and blockchain technologies can improve financial efficiency while simultaneously introducing new forms of operational, legal and systemic risk.

As Dollar stablecoins become more integrated into cross-border payments and savings behavior, policymakers face increasing pressure to modernize regulatory frameworks without restricting financial innovation.

Balancing financial inclusion with economic stability

The debate surrounding Dollar stablecoins increasingly centers on balancing accessibility with macroeconomic resilience.

Supporters argue that stablecoins provide millions of people with affordable access to U.S. dollars, particularly in countries experiencing inflation, banking limitations or foreign exchange shortages. They also facilitate faster international transfers and reduce reliance on expensive intermediaries.

Meanwhile, economists caution that unrestricted access to digital dollars could accelerate capital flight during periods of financial uncertainty.

If market participants begin treating stablecoin prices as the most reliable indicator of foreign exchange conditions, sudden shifts in sentiment could trigger simultaneous exits from domestic currencies, amplifying existing economic pressures.

The IMF paper does not portray stablecoins as inherently destabilizing. Instead, it argues that their impact depends largely on the strength of a country’s exchange-rate regime and the policies governing their use.

For governments maintaining fixed or heavily managed exchange rates, the challenge will be designing regulations that preserve the financial inclusion benefits of Dollar stablecoins while reducing the likelihood that they become catalysts for large-scale currency runs during moments of economic stress.

As digital assets continue to gain mainstream adoption, the IMF’s latest research suggests stablecoins are no longer simply cryptocurrency products—they are emerging as influential participants in the global foreign exchange landscape, with implications extending well beyond the digital asset industry.